* New banking service to be built from scratch (Updates with expert comment, background)

By Mathieu Rosemain and Maya Nikolaeva

PARIS, July 13 (Reuters) - French billionaire Patrick Drahi plans to launch an online bank by early 2019 in the European countries where his telecoms and cable firm Altice operates, a source close to the matter said on Thursday.

The service, to be called Alticebank, would add another layer to the company's businesses, which have already grown beyond telecoms with the acquisition of broadcast distribution rights as well as online video advertising marketplace Teads.

The move also highlights the heightened competition in retail financial services, with mobile operators seeing the increase in smartphone ownership and the lower use of bank branches as an opportunity to challenge traditional lenders.

Altice, a holding company based in the Netherlands, has expanded rapidly through a series of debt-financed buyouts in the United States and Europe. It owns France's second-biggest telecoms firm SFR Group and Portugal's biggest.

"It's the first one on a European level, but certainly not the last one," Julien Maldonato, a partner at Deloitte in Paris, said referring to online banks launched by telecoms companies.

"The logic is to make the heavy telecoms infrastructure profitable," he said.

French rival Orange, which is testing an online bank, hopes to launch it nationwide to take on traditional banks with a low-cost services that will eventually expand to include loans and insurance.

The service, Orange Bank, aims to break even in four to five years and was formed after the former telecoms monopoly bought 65 percent of Groupama Banque last year.

The nationwide launch was postponed last month, however, to allow for additional testing. A union official pointed at the time to issues with the quality of the user interface and customer service.

The Orange plan for France contrasts with Altice's current strategy, under which its new banking service would be built from scratch and need to go through a complex regulatory compliance process.

Altice has requested a banking licence from the European Central Bank (ECB), the source said, confirming an earlier report by newspaper Le Parisien.

The ECB declined to comment. (Additional reporting by Francesco Canepa in Frankfurt; editing by Richard Lough and David Clarke)